Can George Soros' Speech Against Adani Cripple Indian Economy To Script Modi Govt's Ouster In 2024? 

Billionaire investor George Soros predicted on Thursday that the Indian government headed by Narendra Modi will be weakened due to its close association with Gautam Adani, currently embroiled in allegations of fraud. Speaking ahead of the Munich security conference, the 92-year-old billionaire gave his views on the ongoing Adani-Hindenburg row and this has not gone down well with the Indian government. 

Soros stated that Prime Minister Narendra Modi has so far remained silent on the Adani issue but that he will have to ‘answer questions from foreign investors and in Parliament’. Calling Modi and Adani ‘close allies’, the billionaire philanthropist said that their fate is intertwined and that the current issue will significantly weaken Modi’s stranglehold on India’s federal government. He also added that this will open the door to push for much-needed institutional reforms in India, ultimately causing a democratic revival in the country. 

These comments on the state of Indian democracy, coming from a foreign investor, triggered a hostile response from the Indian government led by the Bharatiya Janata Party (BJP). On Saturday, India’s external affairs minister S Jaishankar called Soros an ‘old, rich opinionated person sitting in New York who still thinks his views should determine how the entire world works’. Interestingly, even as a BJP spokesperson accused the Congress party of carrying ‘the propaganda and insidious agenda of self-styled economic war criminal George Soros’, multiple Congress leaders have come out and dismissed the remarks made by Soros. 

Congress’ communications chief Jairam Ramesh responded that a democratic revival in India will have nothing to do with George Soros and that India’s sovereign mechanism prevent a foreign national like Soros from influencing the electoral outcomes in the country. Although the Adani-Hindenburg row has been going on ever since the US-based short-seller accused Adani Group of stock price manipulation and illegal off-shore activities on January 24, a few short comments from George Soros have evoked an unprecedented, hostile response from the Indian government, as well as opposition party members. Perhaps, this is indicative of the massive reputation that George Soros holds in the global financial world and the fact that he is often accused of instrumenting regime changes around the world. 

‘Economic War Criminal’ 

George Soros is very well-known in the business world as an investor, former hedge fund manager and as a philanthropist. Presently, his net worth is around $8.5 billion after he donated $32 billion to Open Society Foundations (OSF). Forbes called him the “most generous giver” for having forfeited close to 64 per cent of his net worth for philanthropic activities. However, he is also infamous for his roles in alleged economic crimes, and is remembered as the man who broke the Bank of England (BoE). 

In what is known as the 1992 Black Wednesday crisis, the UK government had to withdraw sterling from the European Exchange Rate Mechanism on September 16, 1992. This triggered a sell-off the British pound and BoE was required to buy the falling currency at low rates. People like George Soros, who held short position on the falling pound, made a lot of money. It is reported that Soros made around $1 billion in a single day. Just five years later, Soros made bank by going short against a basket of Asian currencies. He bet against the Thai baht and the Malaysian ringgit, perhaps acting as a trigger for came to be known as the 1997 Asian financial crisis. Former Malaysian prime minister Mahathir Mohamad claimed that George Soros ruined Malaysia's economy with his “speculation” against the Asian country’s currency. 

Soros is also accused of bringing around regime changes in countries by using his political and financial clout. In Indonesia, the 1997 crisis led to the end of Suharto’s thirty-year rule and Soros' hand is suspected to be behind this. In the 21st century, Soros is said to have financed the Arab Spring protestors, who brought about regime changes in a host of Arab nations. Going by OSF documents leaked by Wikileaks, Soros has also attempted tinkering in the internal functioning of Albania and Ukraine. In addition to this, other hacktivist groups claimed to have leaked OSF materials that show Soros’ role in attempting radical changes in Russia, West Asia and Europe. 

This history explains why Union Cabinet minister Smriti Irani went on a tirade against Soros on Friday. She said, “A foreign power at the centre of which is a man named George Soros [...] who has announced that PM Narendra Modi will be his main target, also announced that he will help build a system in India that will protect his interests.” At this juncture, she called him an economic war criminal who has declared his ill intentions against Indian democratic processes. 

It is not the first time that a ‘foreign’ body has commented on the Adani Group after Hindenburg’s allegations led to the conglomerate taking a beating on the Indian bourses. From wealth funds and rating agencies, to regulators and bankers, several international bodies and individuals have weighed in the on the crisis that Adani is undergoing. However, Soros’ remarks have caused the ruling dispensation to go on an all-out attack on the nonagenarian billionaire. Although his comments on ‘revival of democracy’ have received the most backlash, from an economic standpoint, his anticipation of souring foreign investor sentiments about India will be more concerning for the Modi government.  

Will Foreign Flows Slow Down? 

India’s equity markets have been on a high, outperforming world markets both before and after the pandemic. The ruling government presents India as a preferred investment destination, showing how the foreign direct investments (FDI) have been rising. Ministry of Commerce reported that FDI inflows have increased 20-fold  in last 20 years. In fact, in FY2021-22, India received $83.57 billion in FDI, a historic annual high. However, India’s FDI inflows are not as impressive as this data suggests. 

If one takes a look at India’s FDI inflows in terms of its gross domestic product (GDP), the country is yet to scale back to the high it touched before the 2008 global financial crisis affected its economy. In 2008, FDI inflows as a percentage of India’s GDP was at 3.4 per cent and it dropped to 1.4 per cent in 2021, as per latest available World Bank data. In comparison, it was at 1.5 per cent in 2014, the year the Modi government came to power for the first time. This is despite the fact that the Modi regime opened up many more sectors to easier FDI intake. 

The Economic Survey 2022-23, that was presented in January this year, expected India’s FDI inflows to rebound in the coming month after a lucklustre show in April-September period last year. However, the survey did not take into account how one of India’s largest conglomerates, instrumental in various aspects of the country’s infrastructural growth with large investments in ports, airports and power, became embroiled in a controversy of international scale.     

Since the Adani Group was accused of accounting fraud and market malpractices by Hindenburg, the listed entities of the group have lost over $100 billion in its market capitalisation. Bonds issued by the group, in pursuit of its financing plans, have also had a volatile run in the past few weeks. In addition to the cancelling of its flagship company’s record share sale plan, the Adani Group also announced that it will cut its revenue growth target by half and scale down fresh capital expenditure, in the wake of the Hindenburg controversy. 

Because state-backed lenders and investors in India have exposure to Adani companies, there has been increasing calls for a domestic investigation into the accusations against Adani. This has resulted in the matter being discussed in the Parliament as well as the Supreme Court. Foreign market regulatory bodies like the ones in UK and Australia also took note of the Adani-Hindenburg fallout, since Adani is involved in financial operations in both countries. At this point, there is pressure on India’s market regulator SEBI (Securities and Exchange Board of India) to see whether there is any veracity in Hindenburg’s claims against Adani. Any oversight from SEBI’s end will affect foreign investors’ view of Indian markets, especially with regards to governance in big Indian companies.  

Offering some relief on this front, would be the recent comments made by Jonathan Gray, president of Blackstone—one of the largest foreign investors in India. Gray told Fortune that recent events have not changed foreign investors’ outlook towards India. However, he noted that keeping best business practices, corporate governance and transparency will make it easier for foreign capital to show up in India. The Adani-Hindenburg row has brought forward questions on corporate governance in the country. 

Notably, just as how the Gautam Adani-led conglomerate called Hindenburg’s accusations against it as an ‘attack on India’, the Modi government’s response to Soros’ remarks is along similar lines. In Indian social media circles that are supportive of the Modi regime, there is a dominant opinion that Hindenburg and Soros, both viewed as short-sellers, are out to make personal gains at the expense of the Indian economy.

Although calling out foreigners for their unsolicited views on India’s democratic functioning and regulatory framework can be construed as a defence of the nation’s sovereignty, it is important to note that global capital’s understanding of borders is not the same. In the coming months, it will become clear whether Hindenburg’s allegations against Adani and Soros’ prediction of a weakening Modi government will have any real impact on foreign investors’ perception of India. Going by Soros’ past record, any economic turmoil where he stands to gain will have serious political implications as well.